Remembering a predator

by PlanMaestro

“We’re in the business of buying assets of great quality at less than replacement cost” – Bruce Flatt

That is not a quote from Flatt’s Whitman business school presentation but from the recent interview “The Perfect Predator”. Predator is a good metaphor to what is needed when investing in commodities and hard assets: waiting while on the hunt for that few transactions that make outsized returns.

I wish I had not learned it the hard way. The 1982 Latin American debt crisis was devastating for Chile with an official unemployment rate higher that 30%. And that 30% included the benefits of the government employment programs: the kind that dig a hole only to fill it later.

The largest Chilean business groups were hopelessly levered having used their control of the largest banks for interrelated loans.  With some few notable exceptions. The most important one: Anacleto Angelini.

He was not a political man. It was whispered that his modus operandi was to contribute just enough to all political parties to avoid making enemies.

When banks were nationalized and distressed assets had to be sold not all predators were like him. Others used their political connections to grab some of those distressed assets on preferential conditions. A useful remainder that the word predator is not normally used as a compliment.

Mr. Angelini preferred to let cash do the talking and cash was responsible for his biggest coup: the acquisition in 1985 of Copec and its flagship Celulosa Arauco.

I had the fortune of meeting the man a couple of times when he was not the man but just a family friend. Still, he made an impression on that child. He drove himself the same old car and lived in the same old house. He avoided media and newspapers, that got tired of speaking of him only by hearsay and printing the same old picture… there was no other one.

But most important, he imprinted one motto in my mind even before the acquisition:

lowest cost wins – Anacleto Angelini

Celulosa Arauco’s long fiber pulp total costs are less than $300 per ton and the current market price is almost $1,000 per ton. It takes 20 years to grow radiata pine in Chile, it is not even commercially exploitable in the northern hemisphere (50 to a 100 years). Eucalyptus is ready in 12 years at a fraction of the time of the Canadian and European hardwoods.

That is what I call an unfair advantage, an unfair advantage he was ready to buy at the right price.

The acquisition transformed his financing arm Antarchile into a multibillion commodity conglomerate and, over time, Mr. Angelini became the richest man in Chile and South America. A nice ending for an Italian immigrant that drove trucks in Abisinia and spent time in a British concentration camp during the Second World War.

Anacleto Angelini died in 2007. He was fair and honest. He was not a visionary. He was a predator. One of the best.